Gina Rinehart is likely to find investing in Fairfax Media a deeply frustrating experience, whether she’s trying to influence the newspapers or just make money.
Like her father, Lang Hancock, Rinehart is not a portfolio investor looking to invest her iron ore money in a diversified portfolio of businesses and assets to spread risk.
She was raised on mining and right-wing politics and was taught by her father that owning media was a source of influence, along with giving politicians money directly and nagging them, and everyone, endlessly about the benefits of small government and the evils of environmentalism. Gina Rinehart is not a nag like her father and she hangs onto her money like a limpet, although she is starting to dabble in media companies.
But she will need to buy more than 15% of Fairfax to have any say — even if she does manage to get on the board.
It’s possible that Fairfax board meetings will become slightly less civilised affairs if Australia’s richest person is present as part-owner of the company, but 15% doesn’t buy you the ability to change strategy or management.
It’s true that 10% of the Ten Network got her on the board, and the sudden appearance of a Sunday morning TV show by her favourite columnist, Andrew Bolt, is often cited as evidence of her influence, but there is no way that would have happened against the better judgment of Ten’s programmers. No doubt they were ready to try anything to combat the dominance of your correspondent in the 10am time slot on Sunday.
I used to work for Lang Hancock in the seventies on the one newspaper the family actually owned — the National Miner — when he was at the peak of his political powers, such as they were, and Gina was a young heiress learning the business and starting a family of her own.
In those days Lang made a lot of noise and gave a lot of cash to favoured politicians such as Joh Bjelke-Petersen and John Martyr, but he mostly wasted his breath and his money. I suppose he was one of the cacophony of voices that led to the rise of right-wing (small government) politics around the world in the 1980s, but Margaret Thatcher and Ronald Reagan were perhaps somewhat more influential.
These days big government is ascendant and capitalism is in crisis, thanks to an excess of debt plus the fragmenting, democratising, pirating effect of the internet.
In fact, the way central banks in Europe and the United States are controlling the financial system these days with their emergency liquidity programs, we virtually have a centrally planned economy in the west. Meanwhile the world’s most successful economy is a communist dictatorship.
It’s a little hard to tell since she hasn’t yet given us the benefit of her views in either a book or a long interview, but Gina Rinehart appears to be an unreconstructed Thatcherite/Reaganite as well as a full-blown climate sceptic.
But to force Andrew Bolt into The Sydney Morning Herald and The Age, I’d say she would need to buy 51% of the company, and even then she’d struggle.
As for buying 235 million Fairfax shares at 81.8 cents as an investment — it’s a roulette play, in my view.
Either chief executive Greg Hywood pulls it off and Fairfax makes a profitable transition to being a digital company, or he doesn’t and the company goes back into receivership and shareholders lose everything. There isn’t any middle ground, in my view.
And even if he does pull it off, the stock is unlikely to be a short-term ten-bagger: there are far better speculative plays in the industry Gina Rinehart knows best.
The digital transition for all traditional media companies is more about survival than riches. It’s about figuring out how to move from high margins to low margins, not the other way around.
*This article was originally published at Business Spectator